To put it simply, leasing is a form of financing a vehicle such as a car, truck, SUV, van etc over a pre-determined period of time. While it sounds similar to renting a car, the two should not be confused with one another.
You can rent a car or truck for a few hours, days or weeks, while leasing typically requires a minimum of a 24 month commitment. It also doesn’t provide easy termination of the lease agreement or allow you to simply swap the vehicle if you don’t like it.
Leasing means that you’ll agree to insure the vehicle, make regular monthly payments, maintain your vehicle and take good care of it. You also agree to keep it for a set number of months, usually 24, 36 or 48. You’re expected to keep your vehicle until the end of the lease period, unless you use a service like Lease Busters to have someone take over your commitment.
Just remember, when you lease you are responsible for all maintenance, regular service, taxes and other applicable fees. Some manufacturers such as Ford and BMW offer warranties that will cover the cost of all service appointments required during the length of your lease.
If the vehicle is entitled to a manufacturer’s warranty, you’ll also be able to use that if needed.
You Can Negotiate The Lease Price
When you choose to lease a vehicle, you can negotiate the purchase price with the dealer like you would if you chose to finance instead. Some automotive dealers tell customers that the price cannot be negotiated but that simply isn’t true.
After a deal has been reached on the price, the dealer will sell the vehicle to the leasing company at the pre-negotiated price. The leasing company will then lease the vehicle to you.
The Vehicle Dealer Is Not the Leasing Company
When you choose to lease a vehicle, the car dealer acts as an intermediary for the sale between you and the leasing company. You won’t begin to deal with the leasing company until you start making payments on the vehicle.
How Does The Process Work?
After you’ve decided on which car you’d like, the dealer will calculate the lease payment for you. The lease payment is based on factors such as the final sale price, the length of the lease, warranties, taxes, registration fees and any down payment that is made.
When the payment is finalized and the contract is signed you’ll be required to pay your first month’s payment, as well as any applicable taxes and fees.
What Happens At The End Of A Lease?
When your lease is finished, you’re expected to return your vehicle to the leasing company. Regular wear and tear is expected but you’ll be responsible for excessive damage or extra mileage you used during the term of your lease.
When you go to bring your vehicle back, you’ll also have the option to purchase the vehicle for a guaranteed price. That price is determined when you first lease the vehicle. If you choose not to buy the vehicle and there is no excessive damage or mileage, you can simply hand the leasing company your keys and walk away. The article What Happens At The End Of A Lease goes into more detail and gives other options that are available.
Summary
Leasing a vehicle is a viable option, depending on your current lifestyle. When you go into a dealership to buy a vehicle, there is room to negotiate whether you choose to lease or finance. You’ll have more room to negotiate if you look at the previous years model or a demo unit that the dealer has available.
